Green hydrogen fever gets needed doses of reality

MELBOURNE, Aug 1 (Reuters Breakingviews) - Hot air is seeping out of the green hydrogen bubble. Over the past five years fans of the low-carbon gas have argued it can replace fossil fuel in everything from industrial processes to heating homes to transport. Yet cost and science make many of its applications fanciful. Developments in July at two big proponents of the technology suggest the industry may be about to get more practical and smaller.

Prime Minister Narendra Modi's administration has set a target of cutting freshwater extraction to less than 50% by 2030 from 66%, the highest rate in the world.

European Union auditors, for instance, have called the bloc's target of producing 10 million tons of green hydrogen and importing as much again by 2030 as "overly optimistic, opens new tab" and lacking "robust analyses". Fortescue meanwhile, has just ditched its goal of producing 15 million tons a year by 2030. Andrew Forrest, the $38 billion Australian iron ore miner's founder and a climate campaigner, has been one of the gas' most vocal backers, calling sceptics "muppets".

Forrest blames high energy costs for the pullback from the gas extracted from water using renewable energy. That's just one of many factors though. The scale of power needed is daunting: using green hydrogen in all steelmaking, aviation and shipping would require almost five times the solar and wind capacity installed globally in 2022, says Michael Liebreich, co-managing partner at EcoPragma Capital. The storage and shipping capacity required is also higher than for the conventional hydrogen made from fossil fuels.

All in, producing green hydrogen, for most companies, would currently cost at least $6 a kilogramme, four times the expense of producing the dirtier version of the gas, per Liebreich. He notes, using International Energy Agency data, that just 1% of some 1600 green hydrogen projects by production volume have progressed much beyond the exploratory stage.

And as a fuel it is incredibly wasteful. At least 70% of the energy is lost to making and moving it by the time it lands in, say, a hydrogen-powered car, like the 500 Mirai models Toyota Motor supplied to the Paris Olympics; for pure electric vehicles, the loss is just 20%, according to White House climate adviser Saul Griffith.

The concept still has some clear uses. It could replace the natural, or fossil, gas that currently creates around 100 million tons a year of hydrogen for manufacturing fertiliser, petrochemicals and other products. It could replace coal in at least some steelmaking, which is where Forrest is now focusing Fortescue's efforts. And it could play a small role in other applications, say as emergency long-term backup in some electricity grids.

But electric batteries, heatpumps and biogas are usually better alternatives to green hydrogen for power, heating and transport - from cars to jet fuel. Trying to compete with them will just burn money.

Fortescue Energy CEO Mark Hutchinson on July 25 said the company is "steadfast in its commitment to green hydgrogen".

He was speaking to investors and analysts a week after parent company Fortescue said it was putting on hold its target of producing 15 million tons of green hydrogen by 2030.

On July 17 the European Court of Auditors published a report saying that the European Union is unlikely to meet its "overly ambitious" goals of producing 10 million tons of green hydrogen and importing a further 10 million tons by 2030.